United Kingdom: Inflation moderates in December
Latest reading: Inflation fell to 2.5% in December, down from November’s 2.6% and below market expectations. However, inflation was still slightly above the Bank of England’s 2.0% target. Looking at the details of the release, prices for recreation and culture plus hospitality increased at a weaker rate in December.
In addition, the trend pointed down mildly, with annual average inflation coming in at 2.5% in December (November: 2.7%). Meanwhile, core inflation fell to 3.2% in December from the previous month’s 3.5%. Moreover, services inflation—a closely watched metric by the Bank of England—came in lower than expected.
Lastly, consumer prices increased 0.30% over the previous month in December, picking up from November’s 0.09% increase.
Panelist insight: On the implications for monetary policy, Nomura analysts said:
“Together with weak producer prices (upstream service prices fell for the first time in Q4 for over four years), [December]’s encouraging CPI print supports the case for ongoing rate cuts. We expect quarterly 25bp cuts to a terminal rate of 3.50% early next year.”